There wasn’t much to look at in terms of impact activity in Central America back in 2015. That’s when Daniel Buchbinder, founder of Guatemala-based business services company Alterna, approached New Ventures about launching an edition of its Latin American Impact Investment Forum in Antigua.
“It started as a 250-person event,” Buchbinder recalls.
With so many small countries in the region, it took some convincing to bring investors to the table.
“What we’ve been doing ever since is nurturing that grain of sand we put into the ecosystem,” Buchbinder tells ImpactAlpha in a Q&A interview. “It’s been an important event for bringing investors from the world to Central America.”
FLII Centroamerica kicks off its ninth edition in Costa Rica next week. A new twist: it has added “y Caribe” to the name to bring entrepreneurs, investors and ecosystem builders from the Caribbean into the fold. Buchbinder wants to replicate the work he has done with Alterna, New Ventures and other partners in putting Central America on the map for impact investing in other small and challenging markets.
Haiti will be in the spotlight.
“It’s complex, but there are good entrepreneurs and companies. This is an invitation and challenge to the impact ecosystem at large to put our minds together creatively to support companies making good things happen there,” says Buchbinder.
He’s optimistic because of the growth he’s witnessed in impact investing in Central America’s small and sometimes politically challenging markets.
“We are seeing more activity from family offices, and more banks talking about green lending and gender lending. We’re also seeing more funds raising,” he observes. “There’s a nice combination of energy and dynamism around impact in Central America right now.”
ImpactAlpha: The FLII Centroamerica is starting its ninth year. Take us back to what the impact scene was like in Central America when you started.
Daniel Buchbinder: In 2015, impact investing in Central America and the Caribbean was not happening. We partnered with New Ventures to bring the Latin American Impact Investment Forum to Central America. It started as a 250-person event in Antigua, Guatemala 10 years ago and what we’ve been doing ever since is nurturing that grain of sand we put into the ecosystem. It’s been an important event, bringing investors from the world to Central America.
ImpactAlpha: How did you get involved in the impact scene in the region?
Buchbinder: I’m from Mexico City. My professional career began in the corporate consumer goods market. I worked for L’Oreal in Mexico and Europe. I didn’t plan to become an entrepreneur.
About 15 years ago, I came to the highlands of Guatemala, to a city called Quetzaltenango. It’s very rural. I was planning on coming here for six months, but it was not a place that the public, private or civil society sectors were covering. So one thing led to another, and I decided to launch Alterna to support the needs of micro and small entrepreneurs.
ImpactAlpha: Share a bit about Alterna’s model.
Buchbinder: Alterna is an entrepreneurial hub. We offer a range of services and tools to address entrepreneurs’ cycle of needs and help them fulfill their impact potential. We’ve been able to cultivate more than 6,000 businesses in Central America and Mexico since we started 14 years ago.
We didn’t think that a traditional approach to incubation or acceleration attended to micro and small businesses in Central America in an inclusive way. We’re trying to create a movement to drive a new generation of companies that start out with an impact purpose, or that along the way move in that direction.
ImpactAlpha: How do you define impact for the types of small businesses you’re supporting.
Buchbinder: We have four lenses. One is for companies with a gender lens that are intentionally impacting women in their value chains and in governance.
Another looks at a youth lens. So many traditional businesses are going through a generational change, and with young people, there’s a very clear trend toward conscious business in Central America.
There is a lens for rural communities. Entrepreneurship ranks pretty high in Central America but it’s mostly out of necessity and most of these are based in the food sector and [many are run by] Indigenous entrepreneurs. We want to encourage more opportunity-based entrepreneurship.
Finally, we take a sustainability lens for innovative, purpose-driven companies focused on the circular economy, education, financial services, culture and arts.
ImpactAlpha: What challenges were small businesses in Central America grappling with when you started Alterna, and how is Alterna helping to address those.
Buchbinder: We’ve encountered many gaps in tailored financing for early stage companies, so we started a couple of impact lending companies. At the moment, all are doing debt.
The first is Devela Capital, which uses a flexible and patient lending instrument – a revenue-based loan – to address the part of the “missing middle” with the most demand. In Central America, those are companies looking for tickets of $15,000 to $100,000.
We have also done a joint venture with a prominent regional asset manager, IDC, that has a lot of experience in venture capital and private equity and the stock exchange here in Guatemala. We’ve partnered with them on another lending venture called Acceso Impact Fund for tickets of $100,000 to $500,000.
We’re trying to provide a funding horizon for companies at these levels.
ImpactAlpha: How much hands-on support have these companies needed and where have you been able to bring in other players in the business ecosystem?
Buchbinder: We have a dual approach. About 75% have been directly cultivated and served by Alterna. We curate services to the needs, capacity and ambitions of different types of companies – for example, micro companies working in the highlands of Guatemala – based on their financial and impact projections.
For the other 25% we work through cultivation allies: local incubators, microfinance companies, the Chambers of Commerce in Honduras, El Salvador, Guatemala and Mexico with a presence in rural areas.
ImpactAlpha: You have worked hard over the last 10 to 15 years to bring in new players, new investors, to build an impact hub in Central America. Reflecting back on where you started, what is the ecosystem and investor appetite like now?
Buchbinder: There is a lot of appetite for the kind of work that we’re doing, but we need more patient capital, because we are just getting traction in the region.
What I am really excited about is that we are seeing more activity from family offices and more banks talking about green lending and gender [lending]. There is still a path for them to become more sophisticated and intentional, these traditional actors, but they have interest and they’re trying to understand how to include these topics in their general strategies.
We’re also seeing more funds raising. There are new names and people from Costa Rica, from El Salvador, from Honduras with new vehicles and instruments. There’s a nice combination of energy and dynamism around impact in Central America right now.
ImpactAlpha: What new challenges are arising? For example, how are climate issues showing up in the region, particularly for the types of small businesses Alterna supports.
Buchbinder: At FLII we are releasing the first climate finance report for Central America. Central America is made up of relatively small markets facing important climate challenges. Climate inequality in the region is very clear.
Businesses’ needs are evolving. They need everything faster, especially debt. Agile financing is important so companies don’t lose opportunities.
ImpactAlpha: You’ve added “y Caribe” to this year’s FLII Centroamerica title, which seems like an intentional evolution–bringing in and helping to build another new and nascent impact ecosystem. Buchbinder: This is the first year the Caribbean will have a strong presence at FLII. Especially Haiti. There’s a call to action for Haiti, because it’s complex, but there are good entrepreneurs and companies. So this is an invitation and challenge to the impact ecosystem at large to put our minds together creatively to support companies making good things happen there.
